Additionally I sent this email to Russ today, might as well post it here.

"I play online poker/sports bet professionally and was informed we need to report Online Gambling Account balances as foreign bank accounts. I understand the FAQ to suggest reporting the highest balance of the account during the tax year. Due to the high volatility of a gambling account, reporting each account at its peak would show balances 10x greater than my net worth or income, would look highly suspicious in my opinion.

Alternatives seem to be declaring my current balances or the respective balances at the time of my largest offshore holdings.

Do you have any thoughts on this?"

I can't tell you the number of sports books I've run 2k into 50k+ and back to zero. Or move a ton of money between stars/ftp/ub artificially inflating maximum balances.

Additionally, anyone care to confirm we have til the 30th of June to complete these forms?

You definitely have until June 30th

You are right that those numbers will probably attract attention, but if you have good records it should be fine

I'm not talking about just Russ, I'm talking about every single time someone posts tax questions they are recommended to just go talk to a professional and the 'professionals' really have no clue about this. Then when that person gets the advice told by them on the forum to seek out from this professional, they then are told to just "talk to somebody else". Just one big clusterf*ck. Basically I fail to see how anyone not keeping up with 2p2 or w/ Russ updates for that matter would ever be reporting 100% correct even if they tried to do so through good will... so that mean 99% of people are screwed?

The hundreds of people who have taken down sunday million tourneys over the past 5 years that just decide they hit a big score and don't wanna lose it so they cash out are all going to jail or going to get screwed by the IRS financially for reporting incorrectly? That seems highly unlikely and impractical given the circumstances that most CPAs and tax pros don't know how to file correctly so someone that's attempting to and being given wrong information wouldn't have a clue either. So I fail to see why the IRS would be punishing people in the manner being hinted to in these threads.

The tax professionals I talked to said the IRS reserves jail time for the most part for people specifically doing hardcore stuff to try to screw them over and big fines/interests for those types blatantly cheating as well, not people who went to tax professionals and CPAs wanting to do the right thing and just being given incorrect info because nobody has a clue how to do it.

The IRS is a collection agency, they dont get paid while you are in jail. I agree with you that the "go to jail" problems are never going to happen if you made a good faith effort to report. You cant pay from jail after all.

Penalties, interests, and negligence penalties are very much in play though, and suck a lot.

Most people that screw up their taxes, willfully or not, in any form get away with it. If you dont do it right and are one of the unlucky few, life is going to suck financially. For example, if you filed net winnings then said "gosh I didnt know I was supposed to file gross winnings" and dont have records, you arent going to jail. You will however get a 25% penalty for failure to keep records though and some sort of estimated tax liability (with penalties and interest) that you arent in position to challenge. Is the IRS going to challenge everyone? No, its impractical, but if you are one of the unlucky ones and do it wrong than you are screwed.

So if you talk to a professional, and he comes back with something that is clearly wrong (like file net winnings), then I think its a good suggestion to see someone else.

If your main point is that no one is going to be fined $100K or thrown in jail for not reporting a poker account via FBAR while making a good faith effort to report income, I completely agree with you. If you think there is no chance that they fine you $10K for failure to report, or at least use that as leverage if you are unlucky enough to get audited, I disagree.

The official laws as far as I know says "up to 25%" and you nor anybody else is really in a position to know exactly how much of a penalty the IRS would issue for someone that they believed made a good faith effort to report.

That's one point I suppose, but the main point was that everyone recommends talking to a professional CPA, which I've done numerous times and a lot of different ones to boot, and none of them offer advice anything like recommended on these forums. So my point is that it's one big clusterf*ck because people here are advising people to go talk to professionals, but those professionals don't have a clue how to report anyway so everything regarding paying poker taxes is pretty much designed for people to report incorrectly, thus I have a hard time imagining the IRS laying the smack down on people that attempted to do the right thing.

If someone believes that the system is set up in a way that's going to have 99% of people breaking the law unintentionally and then punish them with stiff consequences for it, then hey you can believe that, but I don't think that's how things are going to play out and many professionals I've talked to don't think so either. And if they do decide to hand out those huge penalties, well then 99% of people playing poker and winning are probably going to get hit with it since the % of people that KNOW how to report correctly and are doing so is incredibly small. ESPECIALLY when people that want to report correctly come to forums like this one (legislation) and are then led astray by being told to talk to a professional who is certainly going to have them doing things incorrectly.

Basically what I'm saying is: Most people wanting to do things correctly and talking to professionals will end up filing incorrectly and not reporting what's in accounts either, thus... most people are going to be candidates for getting in trouble w/ the IRS even if they did their best to comply. So basically I have a hard time believing the IRS plans to ruin people financially that did their best to do things correctly. That's ridiculous. That's like gov't having laws hidden deep in paper work that even professionals don't know about and then just coming out and giving everyone max penalties for not complying. Then on top of that, reporting poker sites as bank accounts has plenty of ambiguity to it.

On the subject of declaring the "maximum value of account during calendar year reported", how exactly would one obtain this value if they didn't exactly keep records of how much was in there at any given time? If this has already been answered in this thread, then I apologize, as I am still reading the posts in this thread.

Boobies:

Great posts. Your common-sense posts are definitely in order. I agree with pretty much everything you wrote.

I report mine for my personal peace of mind. I doubt that reporting will cause me to get audited or that not reporting would cause me to pay a fine. But I'll be less stressed about taxes if I am able to tell the IRS (and myself), "I did everything that I was supposed to do."

Now that's an interesting perspective. Considering that there is a memorandum that says that tokens in play are not increments in wealth, there is some logic to that.

I will say I agree with Russ that the IRS could make an argument based just on how the code reads for domestic casinos. Apply it to foreign casinos and it looks like a foreign account. I agree with you there is greyness here.

Sec 5312 says:

"...“financial institution” means— ...

...(X) a casino, gambling casino, or gaming establishment with an annual gaming revenue of more than $1,000,000 which—
(i) is licensed as a casino, gambling casino, or gaming establishment under the laws of any State or any political subdivision of any State; or
(ii) is an Indian gaming operation conducted under or pursuant to the Indian Gaming Regulatory Act other than an operation which is limited to class I gaming (as defined in section 4(6) of such Act);..."

So a foreign financial institution would be........

Now I suspect domestic casinos are financial institutions so they can send out SARs (suspicious activity reports). Winnings are not particularly suspicious. That's why jackpots were recently exempted from CTR filings by casinos.

Foreign casinos don't send out SARs and notice that code is specific that only domestic casinos are "financial institutions".

Now look at the directions for form TDF 90-221. It defines financial institution as:

"This term includes any bank, securities,
securities derivatives or other financial instruments accounts.
Such accounts generally also encompass any accounts in
which the assets are held in a commingled fund, and the
account owner holds an equity interest in the fund (including
mutual funds). The term also means any savings, demand,
checking, deposit, time deposit, or any other account
(including debit card and prepaid credit card accounts)
maintained with a financial institution or other person
engaged in the business of a financial institution."

You don't see casino or poker account do you? And we know from Sec. 5312 that it isn't because the IRS hasn't thought about defining institutions that way - because they did it with domestic casinos.

Add to that the advisory memo that tokens in play are not increments in wealth and certainly you have a case.

But... you pay your money ... you take your chances.

Now let me issue a standard Circular 230 caveat:

As required by U.S. Treasury Regulations governing tax practice, you are hereby advised that any written tax advice contained herein was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding tax penalties that may be imposed under the Internal Revenue Code.

Good luck,
mrick

Sometimes I wonder if taking a naive view isn't useful, rather than tearing apart every word of specific regulations. Is my poker account a financial account? Well, it holds money, and I can deposit to it and withdraw from it at will. Sounds like a financial account to me. (Except for the mechanisms used, that sounds a lot like my savings account.)

The main argument I've heard against filing this form is that it will increase your chances of being audited or otherwise being subjected to unwanted scrutiny. That's an unproven assertion that I'm not sure I agree with. Also, if you have filed your taxes conscientiously, such scrutiny should not be disastrous, though it certainly won't be pleasant.


So as I see it, the arguments come down to this:

Negative consequences of not filing are: specific, utterly disastrous, and extremely unlikely.
Negative consequences of filing are: vauge, could range in severity from annoying to moderately severe, and very unlikely.

To me that seems 1) a mild argument in favor of filing the form, and 2) a strong argument that it's not worth this much time and effort to debate.

What do you expect this is a message board. And the fact is you do find a good CPA, they will research and find out what you need to do. A good CPA doesn't need to know anything about poker, they just have to be competent enough to research and correctly interpret the laws and codes that govern this.

Just something to think about....

A good friend of mine is a long time IRS CID (criminal investigative division) agent. According to him if you answer the question about Foreign Bank accounts incorrectly and you actually have foreign bank accounts you have filed a false tax return and it opens you up you all sorts of nasty penalties and such. It is a big tool for them in going after people with unreported Swiss bank accounts.

Might be better to take the conservative route when addressing this question i.e. report accounts if you are not sure.

When you report yours, how do you figure out the exact max amount that was in there if all you use is PT or HEM?

This seems like it could open a huge can of worms in regards to what is a session and how much you've earned that is taxable. Won't these numbers be incredibly inflated compared to what you're declaring?

I hadn't seen an answer to his question and would like to hear it as well. Several posters here say they have filed this form; how did you fill this part out?

I have always chosen "other" and written "online poker room" as the specification. I would imagine that anything along these lines is probably fine, and I can't think of a way to justify an online poker account as a bank or securities account.

As asked by several people in this thread, after checking other, what is the correct account description

interesting...

"What is a financial account?
A “financial account” includes any bank, securities, securities derivatives or other financial instruments accounts. The term includes any savings, demand, checking, deposit, or any other account maintained with a financial institution or other person engaged in the business of a financial institution. Individual bonds, notes, or stock certificates held by the filer are not a financial account nor is an unsecured loan to a foreign trade or business that is not a financial institution."

This is from http://www.irs.gov/businesses/small/...148845,00.html


I absolutely believe an online poker site acct could be considered an unsecured loan to a foreign business.

Any thoughts on this?

Just wanted a lil clarification:

So for "Type of Account" you guys are just selecting other and writing in Online Poker Room Account?

Name of Financial Institution? Should I just put Full Tilt Poker?

and last,
Account number or other designation? Do I just put my screenname??

There is no way to know. Anyone who says otherwise is lying.

Anybody????

Just my two cents, for type of account I would put something generic like "holding account" - I would also put the shell corporations of each site as the "financial institution" instead of the actual poker site name.

And I know this will get alotta flack here but personally I dont think an online poker site is a "financial institution" and most big stake players I know (which is quite a few) are not filing this report. Just my opinion, not saying you shouldn't file it.

Yeah. If the sites hold your money in a segregated player trust/escrow account, then your deposit cannot possibly be considered a loan, because the sites would be holding it for your benefit.

If, on the other hand, the sites deposit the money to, say, their general operating account, and commingle your funds with their profits from the rake, then you would have an argument that, in my view, would, at best, barely pass the straight-face test.

I don't like the loan argument because there is no note, there is no stated interest rate charged for their use of your money, there is no repayment period other than "on demand," and because at no time do they have exclusive use of your money. Think about it--if a bank loans you $200k to buy a house, they do not have access to all or any part of that money. That is not true of your money in your poker account.

The better argument against filing the FBAR is that the sites are not financial institutions. The argument that they are is outrageously intellectually dishonest and asinine. BUT: that wouldn't stop the IRS from asserting it, and, therefore, I am with Russ on filing the FBAR out of an abundance of caution.

Hey Guys,

I was wondering what people were putting down for "type of account" and "number of owners"

I was going to say something like "Holding Account" and "many" respectively.


Greg

Are you filing them under "Accounts Owned Jointly"? Shouldn't they be "Accounts Owned Separately"?